Iceland remained independent for over 300 years, and was subsequently ruled by Norway and Denmark. Limited home rule was granted in 1874, and independence followed in 1918. The Danish king remained the sovereign until 1944, when a republic was founded.

Iceland's old parliament, the Althing, has 63 members, who are elected by the population every four years. Head of the government is the prime minister, who together with his cabinet takes care of the executive part of government. The prime minister is appointed by the president, who is elected every four years, and is the head of state.

Iceland is located on a geological hot spot on the Mid-Atlantic Ridge. It has many active volcanoes, notably the Hekla, and around 10% of the island is glaciated. Iceland has many geysers (itself an Icelandic word) and the widespread availability of geothermal power means residents of most towns have hot water and home heat for a low price.

The island itself has many fjords along the coastline, were also most cities are situated. The main towns are the capital Reykjavík, Keflavik, where the national airport is situated, and Akureyri.

The economy depends heavily on the fishing industry, which provides over 60% of export earnings and employs 8% of the work force. In the absence of other natural resources (except for abundant hydro-electric[?] and geothermal power), Iceland's economy is vulnerable to changing world fish prices. The economy remains sensitive to declining fish stocks as well as to drops in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon[?].

The only natural resource conversion is the manufacture of cement. Most buildings are concrete with expensive imported wood used only sparingly and where necessary.

The center-right government plans to continue its policies of reducing the budget and current account deficits, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, diversifying the economy, and privatizing state-owned industries. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources.

Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale-watching. Growth has slowed between 2000 and 2002, but is expected to pick up in 2003.

The isolated location of Iceland has resulted in limited immigration and limited genetic inflow in its human population over hundreds of years. The resulting genetic similarity is being exploited today for genetic studies.